UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2003
Commission File Number: 0-13322
United Bankshares, Inc.
| West Virginia (State or other jurisdiction of incorporation or organization) |
55-0641179
(I.R.S. Employer Identification No.) |
| 300 United Center 500 Virginia Street, East Charleston, West Virginia |
25301 | ||||
(Address of Principal Executive Offices) |
Zip Code | ||||
Registrant’s Telephone Number, including Area Code: (304) 424-8800
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) Yes [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class - Common Stock, $2.50 Par Value; 41,647,132 shares outstanding as of April 30, 2003.
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
| Page | |||||
PART I. FINANCIAL INFORMATION |
|||||
Item 1. Financial Statements |
|||||
Consolidated Balance Sheets as of
March 31, 2003 (Unaudited) and December 31, 2002 |
5 | ||||
Consolidated Statements of Income (Unaudited) for the
Three Months Ended March 31, 2003 and 2002 |
6 | ||||
Consolidated Statement of Changes in Shareholders’ Equity
(Unaudited) for the Three Months Ended March 31, 2003 |
7 | ||||
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2003 and 2002 |
8 | ||||
Notes to Consolidated Financial Statements |
9 | ||||
Information required by Item 303 of Regulation S-K |
|||||
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
24 | ||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
31 | ||||
Item 4. Controls and Procedures |
35 | ||||
PART II. OTHER INFORMATION |
|||||
Item 1. Legal Proceedings |
36 | ||||
Item 2. Changes in Securities and Use of Proceeds |
36 | ||||
Item 3. Defaults Upon Senior Securities |
36 | ||||
2
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS--Continued
| Page | |||||
Item 4. Submission of Matters to a Vote of Security Holders |
36 | ||||
Item 5. Other Information |
36 | ||||
Item 6. Exhibits and Reports on Form 8-K |
36 | ||||
Signatures |
37 | ||||
Certifications |
38 | ||||
3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
The March 31, 2003 and December 31, 2002, consolidated balance sheets of United Bankshares, Inc. and Subsidiaries, and the related consolidated statements of income for the three months ended March 31, 2003 and 2002, and the related consolidated statement of changes in shareholders’ equity for the three months ended March 31, 2003, and the related condensed consolidated statements of cash flows for the three months ended March 31, 2003 and 2002, and the notes to consolidated financial statements appear on the following pages.
4
CONSOLIDATED BALANCE SHEETS
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except par value)
| March 31 | December 31 | |||||||||||
| 2003 | 2002 | |||||||||||
| (Unaudited) | (Note 1) | |||||||||||
Assets |
||||||||||||
Cash and due from banks |
$ | 164,894 | $ | 162,261 | ||||||||
Interest-bearing deposits with other banks |
91,858 | 13,102 | ||||||||||
Federal funds sold |
32,725 | |||||||||||
Total cash and cash equivalents |
289,477 | 175,363 | ||||||||||
Securities available for sale at estimated fair value (amortized
cost-$1,067,243 at March 31, 2003 and $996,198 at December 31,
2002) |
1,088,284 | 1,022,314 | ||||||||||
Securities held to maturity (estimated fair value-$269,187 at
March 31, 2003 and $266,993 at December 31, 2002) |
262,002 | 263,176 | ||||||||||
Loans held for sale |
478,706 | 582,718 | ||||||||||
Loans |
3,498,866 | 3,576,280 | ||||||||||
Less: Unearned income |
(3,085 | ) | (3,119 | ) | ||||||||
Loans net of unearned income |
3,495,781 | 3,573,161 | ||||||||||
Less: Allowance for loan losses |
(46,985 | ) | (47,387 | ) | ||||||||
Net loans |
3,448,796 | 3,525,774 | ||||||||||
Bank premises and equipment |
48,278 | 48,923 | ||||||||||
Goodwill |
89,600 | 90,416 | ||||||||||
Accrued interest receivable |
27,294 | 27,577 | ||||||||||
Other assets |
84,102 | 55,758 | ||||||||||
TOTAL ASSETS |
$ | 5,816,539 | $ | 5,792,019 | ||||||||
Liabilities |
||||||||||||
Domestic deposits: |
||||||||||||
Noninterest-bearing |
$ | 836,636 | $ | 739,228 | ||||||||
Interest-bearing |
3,139,318 | 3,161,620 | ||||||||||
Total deposits |
3,975,954 | 3,900,848 | ||||||||||
Borrowings: |
||||||||||||
Federal funds purchased |
15,545 | 57,153 | ||||||||||
Securities sold under agreements to repurchase |
501,807 | 511,300 | ||||||||||
Federal Home Loan Bank borrowings |
679,409 | 679,712 | ||||||||||
Mandatorily redeemable capital securities of subsidiary trusts |
28,858 | 28,861 | ||||||||||
Other borrowings |
3,275 | 5,096 | ||||||||||
Accrued expenses and other liabilities |
69,818 | 67,510 | ||||||||||
TOTAL LIABILITIES |
5,274,666 | 5,250,480 | ||||||||||
Shareholders’ Equity |
||||||||||||
Common stock, $2.50 par value; Authorized-100,000,000 shares;
issued-43,381,769 at March 31, 2003 and December 31, 2002,
including 1,637,050 and 1,349,801 shares in treasury at March
31, 2003 and December 31, 2002, respectively |
108,454 | 108,454 | ||||||||||
Surplus |
88,966 | 89,360 | ||||||||||
Retained earnings |
381,239 | 369,122 | ||||||||||
Accumulated other comprehensive income |
9,885 | 13,060 | ||||||||||
Treasury stock, at cost |
(46,671 | ) | (38,457 | ) | ||||||||
TOTAL SHAREHOLDERS’ EQUITY |
541,873 | 541,539 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 5,816,539 | $ | 5,792,019 | ||||||||
See notes to consolidated unaudited financial statements.
5
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
| Three Months Ended | ||||||||||||
| March 31 | ||||||||||||
| 2003 | 2002 | |||||||||||
Interest income |
||||||||||||
Interest and fees on loans |
$ | 60,680 | $ | 63,789 | ||||||||
Interest on federal funds sold and other
short-term investments |
388 | 362 | ||||||||||
Interest and dividends on securities: |
||||||||||||
Taxable |
13,877 | 18,637 | ||||||||||
Tax-exempt |
2,279 | 2,450 | ||||||||||
Total interest income |
77,224 | 85,238 | ||||||||||
Interest expense |
||||||||||||
Interest on deposits |
16,571 | 21,799 | ||||||||||
Interest on short-term borrowings |
2,205 | 2,360 | ||||||||||
Interest on long-term borrowings |
10,819 | 10,431 | ||||||||||
Total interest expense |
29,595 | 34,590 | ||||||||||
Net interest income |
47,629 | 50,648 | ||||||||||
Provision for loan losses |
1,455 | 2,227 | ||||||||||
Net interest income after provision for loan losses |
46,174 | 48,421 | ||||||||||
Other income |
||||||||||||
Income from mortgage banking operations |
11,972 | 6,450 | ||||||||||
Service charges, commissions, and fees |
8,121 | 7,155 | ||||||||||
Income from fiduciary activities |
2,275 | 2,274 | ||||||||||
Security gains (losses) |
866 | (304 | ) | |||||||||
Other income |
361 | 362 | ||||||||||
Total other income |
23,595 | 15,937 | ||||||||||
Other expense |
||||||||||||
Salaries and employee benefits |
21,631 | 17,614 | ||||||||||
Net occupancy expense |
3,316 | 2,639 | ||||||||||
Other expense |
12,618 | 11,777 | ||||||||||
Total other expense |
37,565 | 32,030 | ||||||||||
Income before income taxes |
32,204 | 32,328 | ||||||||||
Income taxes |
9,661 | 10,507 | ||||||||||
Net income |
$ | 22,543 | $ | 21,821 | ||||||||
Earnings per common share: |
||||||||||||
Basic |
$ | 0.54 | $ | 0.51 | ||||||||
Diluted |
$ | 0.53 | $ | 0.50 | ||||||||
Dividends per common share |
$ | 0.25 | $ | 0.23 | ||||||||
Average outstanding shares: |
||||||||||||
Basic |
41,891,007 | 42,899,060 | ||||||||||
Diluted |
42,355,229 | 43,548,650 | ||||||||||
See notes to consolidated unaudited financial statements.
6
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
| Three Months Ended March 31, 2003 | |||||||||||||||||||||||||||||||
| Common Stock | Accumulated | ||||||||||||||||||||||||||||||
| Other | Total | ||||||||||||||||||||||||||||||
| Par | Retained | Comprehensive | Treasury | Shareholders' | |||||||||||||||||||||||||||
| Shares | Value | Surplus | Earnings | Income (Loss) | Stock | Equity | |||||||||||||||||||||||||
Balance at January 1, 2003 |
43,381,769 | $ | 108,454 | $ | 89,360 | $ | 369,122 | $ | 13,060 | ($38,457 | ) | $ | 541,539 | ||||||||||||||||||
Comprehensive income (loss): |
|||||||||||||||||||||||||||||||
Net income |
— | — | — | 22,543 | — | — | 22,543 | ||||||||||||||||||||||||
Other comprehensive income (loss),
net of tax: |
|||||||||||||||||||||||||||||||
Unrealized loss on securities
of $2,735 net of
reclassification
adjustment for gains included
in net income of $563 |
— | — | — | — | (3,298 | ) | — | (3,298 | ) | ||||||||||||||||||||||
Amortization of the unrealized
loss for securities transferred
from the available for sale to
the held to maturity investment
portfolio |
— | — | — | — | 123 | — | 123 | ||||||||||||||||||||||||
Total comprehensive income |
19,368 | ||||||||||||||||||||||||||||||
Purchase of treasury stock
(318,812 shares) |
— | — | — | — | — | (9,078 | ) | (9,078 | ) | ||||||||||||||||||||||
Cash dividends ($0.25 per share) |
— | — | — | (10,426 | ) | — | — | (10,426 | ) | ||||||||||||||||||||||
Common stock options exercised
(31,563 shares) |
— | — | (394 | ) | — | — | 864 | 470 | |||||||||||||||||||||||
Balance at March 31, 2003 |
43,381,769 | $ | 108,454 | $ | 88,966 | $ | 381,239 | $ | 9,885 | ($46,671 | ) | $ | 541,873 | ||||||||||||||||||
See notes to consolidated unaudited financial statements
7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
(Dollars in thousands)
| Three Months Ended | |||||||||
| March 31 | |||||||||
| 2003 | 2002 | ||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
$ | 135,824 | $ | 164,941 | |||||
INVESTING ACTIVITIES |
|||||||||
Proceeds from maturities and calls of investment securities |
1,363 | 5,596 | |||||||
Purchases of investment securities |
(7 | ) | |||||||
Proceeds from sales of securities available for sale |
28,727 | 35,871 | |||||||
Proceeds from maturities and calls of securities available for sale |
277,723 | 107,520 | |||||||
Purchases of securities available for sale |
(376,999 | ) | (203,429 | ) | |||||
Purchase of bank-owned life insurance |
(30,000 | ) | |||||||
Net purchases of bank premises and equipment |
(971 | ) | (815 | ) | |||||
Net change in loans |
75,473 | 12,664 | |||||||
NET CASH USED IN INVESTING ACTIVITIES |
(24,684 | ) | (42,600 | ) | |||||
FINANCING ACTIVITIES |
|||||||||
Cash dividends paid |
(10,526 | ) | (9,891 | ) | |||||
Proceeds from exercise of stock options |
470 | 2,139 | |||||||
Acquisition of treasury stock |
(9,078 | ) | (9,094 | ) | |||||
Repayment of Federal Home Loan Bank borrowings |
(76 | ) | (55,170 | ) | |||||
Proceeds from Federal Home Loan Bank borrowings |
225 | ||||||||
Changes in: |
|||||||||
Deposits |
75,106 | 32,236 | |||||||
Federal funds purchased, securities sold under agreements
to repurchase and other borrowings |
(52,922 | ) | (44,074 | ) | |||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
2,974 | (83,629 | ) | ||||||
Increase in cash and cash equivalents |
114,114 | 38,712 | |||||||
Cash and cash equivalents at beginning of year |
175,363 | 157,594 | |||||||
Cash and cash equivalents at end of period |
$ | 289,477 | $ | 196,306 | |||||
See notes to consolidated unaudited financial statements.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
1. GENERAL
The accompanying unaudited consolidated interim financial statements of United Bankshares, Inc. and Subsidiaries (“United”) have been prepared in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not contain all of the information and footnotes required by accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements presented as of March 31, 2003 and 2002 and for the three-month periods then ended have not been audited. The consolidated balance sheet as of December 31, 2002 has been extracted from the audited financial statements included in United’s 2002 Annual Report to Shareholders. The accounting and reporting policies followed in the presentation of these financial statements are consistent with those applied in the preparation of the 2002 Annual Report of United on Form 10-K. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations for the interim periods have been made. Such adjustments are of a normal and recurring nature.
The accompanying consolidated interim financial statements include the accounts of United and its wholly-owned subsidiaries. United considers all of its principal business activities to be bank related. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Dollars are in thousands, except per share and share data.
In November 2002, the Financial Accounting Standards Board (FASB) issued Financial Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45). FIN 45 will significantly change current practice in the accounting for, and disclosure of, guarantees. Guarantees meeting the characteristics described in FIN 45, which are not included in a long list of exceptions, are required to be initially recorded at fair value, which is different from the general current practice of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement No. 5, “Accounting for Contingencies.” FIN 45 also requires a guarantor to make significant new disclosures for virtually all guarantees even if the likelihood of the guarantor’s having to make payments under the guarantee is remote.
In general, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying asset, liability, or an equity security of the guaranteed party such as financial standby letters of credit. FIN 45’s disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. FIN 45’s initial recognition and initial measurement provisions are applicable on a prospective basis t